EPF Contribution Rules: Government has issued a notification for reducing EPF contribution from 12% to 10% for three months. After this, the EPFO has answered many types of questions regarding the salary of the employees.
new Delhi. The government has issued a notification regarding reducing the Employee Provident Fund contribution (EPF Contributions) for 3 months to 10 percent. After this, the Employees Provident Fund Organization (EPFO) has also answered some of the most asked questions, in which many important things have been clarified. Accordingly, 10 percent contribution is not necessary for both the employee and the employer. It also stated that employers who follow the Cost to Company (CTC- Cost to Company) model, if they have decided to make 10 percent EPF contribution, then they will have to give the benefit to the employees. Let’s know the answers to all the important questions related to this.
In the current crisis of Kovid-19, it was decided as Liquidity Support that the EPF contribution be reduced to 10 per cent so that the take home salary of the employees increases to 2 per cent. It is implemented for May, June and July 2020. According to information provided by EPFO, it is not mandatory for employees and employers. The EPFO said, during these three months the amount of 10 per cent for contribution is minimum. Employees and employers can both contribute more.
Regarding this, the EPFO has made it clear that if an employer decides to contribute 10 percent to his employee’s PF account, then it will have to compensate the loss on the employee’s CTC. This means that if the employer also contributes 10 per cent, then he will have to pay another 2 per cent to his employee, because the entire amount is part of the employee’s CTC.
Employees also have to keep in mind that when they are paid this 2 percent, then tax liability will also be made on it. Suppose the employer contributes Rs 1,200 to your PF account every month and then he has decided to reduce it to Rs 1,000 under the new rules. In such a situation you will get Rs 600 from the employer for these three months. According to the rules, even on this 600 rupees, your tax liability will remain.
Of the total contribution of 12 per cent by the employee, 8.33 per cent is put in the pension scheme. There is a capping of Rs 15,000 on this. In such a situation, even if the EPF contribution has come down to 10 per cent, there will be no effect on pension contribution or benefits. The EPFO has also clarified this.